Spring Budget 2024

Baroness Moyo Excerpts

Monday 18th March 2024 Lords Chamber

[Baroness Moyo (Con)]

My Lords, like many others, I saw some encouraging measures to address investment in Britain in the Chancellor of the Exchequer’s Spring Budget. There is, after all, a widely recognised view that Britain needs much more investment to power its economic growth plans. In this debate, I will reflect on what more needs to be done to make the UK an attractive destination in the eyes of investors, noting that a burden of regulation and bureaucracy is not an attractive elixir. My comments are influenced by my roles as a corporate board member and a member of the Oxford University endowment investment committee, as I have disclosed in the register of interests.

We are all familiar with the prevailing narrative of the UK’s anaemic economic growth. Although Britain’s GDP doubled in the generation from 1995 to 2020, with economic growth averaging 3% per year, the outlook for the years ahead is weak. Specifically, UK economic growth is not expected to exceed 2% between now and 2028, according to the IMF. Meanwhile, the Government’s policy levers are hampered by high public debt and deficits, notwithstanding the constructive trend line mentioned earlier. For example, at the end of September 2023, UK government debt was 100% of GDP, compared with less than 40% of GDP 20 years ago. Of course, the economy remains plagued by a cost of living crisis, with inflation remaining stubbornly at 4%, twice as much as targeted by the Bank of England—things that we are very familiar with. The economy is further constrained by interest rates at 5.25%.

However, it is not only the UK’s macroeconomic picture but the UK’s investment landscape that is challenged. Put simply, Britain is not attracting sufficient capital from investors—retail, institutional, domestic or international—to keep the UK’s companies and capital markets as strong as they should be to propel economic growth. As the Chancellor himself acknowledged, domestic share ownership by institutional investors, such as UK pension funds, is worryingly low, having fallen from 32% in 1992 to a record low of 1.6% in 2022. As someone who grew up in the emerging markets, people always said to me, “Before you invest, think about what the locals are doing”. The fact that even UK pension funds will not invest in this economy, for whatever reason, is an incredibly damning sign.

Furthermore, just 23 initial public offerings took place on the London Stock Exchange in 2023, the lowest since 1995. Think about that for a moment: we have had a pandemic and a financial crisis, and last year was worse for IPOs than any of those periods. International investment flows are also bleak; for example, foreign direct investment into the United Kingdom was just 1.4% of GDP in 2022, according to the World Bank. That contrasts with the period of 1995 to the 2008 global financial crisis, when UK foreign direct investment was regularly 5% or more of GDP.

According to a recent study, UK equities have been trading at a 40% discount to stocks from the rest of the world, underscoring the lack of appetite from investors for investing in the UK. It is critical that UK companies can once again be at the forefront of investors’ minds when they are allocating capital and that the stock market becomes attractive to companies seeking listings. I welcome the Chancellor’s new measures to channel more investment into UK equities and to introduce a new UK ISA to support savers. That has the potential to attract up to £4 billion a year of investment capital from retail investors.

I am also aware that the Chancellor has previously laid out commitments to attract higher levels of pension fund capital to unlisted UK companies, particularly in his Mansion House speech. Some have raised the question of whether it is right to compel investors to allocate capital to UK equities or whether it is in fact better to incentivise them. With that question in mind—and recognising my noble friend the Minister’s earlier comments on full expense leasing, small business support and VAT threshold changes—I would like her to state what specific plans this Government have to address the UK’s underperformance in attracting investment. What specific plans do the Government have to incentivise institutional investors, both domestic and international, to allocate more capital to UK equity markets and UK companies?

International Women’s Day

Baroness Moyo Excerpts

Friday 8th March 2024 Lords Chamber

[Baroness Moyo (Con)]

My Lords, I join today’s common refrain in welcoming the noble Baroness, Lady Casey. We very much look forward to hearing her maiden speech, as well as her many contributions to come in the future.

As has been mentioned, International Women’s Day offers us an opportunity to take stock of our achievements toward the economic inclusion of women, and to highlight where more work needs to be done towards greater equality. The debate has been shaped around the economic disparities that persist between men and women globally. Women generally face lower pay, higher levels of informal employment and more unpaid care work than men, as has been repeated multiple times.

I will spend some time talking about signs that there are improvements occurring that are quite meaningful and ought to be stressed. It would be a missed opportunity if I did not highlight several important gains in women’s participation in the economy in recent times. In doing so, I will focus on progress in areas of corporate leadership. While it is arguably a narrow purview, it reflects my own experience in economics and finance, and on the boards of a number of global corporations. Specifically, I will offer three data points that demonstrate clear improvements in women’s economic inclusion.

First, on corporate boards, according to Cranfield University, female directorships in the FTSE 100 have risen from 5.8% in 2000 to nearly 40% in 2022. Secondly, as of just a few weeks ago, in February 2024, 10% of FTSE 100 companies have female chief executives; this is still low, but the number is double the 5% level of a decade ago. We see a similar trajectory in the United States where, in 2023, 10.4% of Fortune 500 companies had women CEOs. A quarter of the 52 leaders had become CEOs in the prior year, obviously suggesting that there is momentum. A third area of positive momentum for economic inclusion is that women are now showing up more as entrepreneurs. In 2022 the Rose review revealed that women in the United Kingdom established more than 150,000 new companies, more than twice as many as in 2018.

Even more encouraging is that a growing proportion of these start-ups—approximately 17,500—were founded by young women aged 16 to 25 years old. In 2022, one in five UK businesses were all-female led, compared with one in six in 2018.

Notwithstanding these positive trends, more effort, particularly targeting a broader base of women, is urgently needed, and clearly this is a message that has become clear in the debate that we have had so far. After all, scrutinising the most senior positions does not offer a true representation of women across the economy. Indeed, when we look over women’s inclusion across the broader economy, it is easy to identify specific areas where much more progress is needed.

Notably, returning to the framework of this debate, the 2023 United Nations sustainable development goals report noted two things. It noted that women spent about three times as many hours in unpaid domestic and care work as men, and that on average, women in the labour market still earned 23% less than men globally. In the United Kingdom specifically, the gender gap—which has been mentioned a number of times already—was at 14% as of April 2023. As has been mentioned previously by my fellow Peers, the Office for National Statistics has stated that the median weekly earnings for men are £666 and are £491 for women.

I was not yet elevated to the Lords, so I was not able to participate last year, but last year’s report by the Financial Inclusion Commission stated that there are 11 million women who are denied access to mainstream financial products, and that women also pay higher interest rates on credit cards—an extra 0.8%—and are less likely to be pre-approved for credit than men. It is here that public policy can and should make a real difference.

Meaningfully addressing economic inclusion matters importantly, because it will reverberate into improved health equalities, educational attainment and, ultimately, social mobility. As has been stated on a number of occasions, this is absolutely foundational if we are to hope for human progress and economic growth.

King’s Speech

Baroness Moyo Excerpts

Monday 13th November 2023 Lords Chamber

[Baroness Moyo (Con)]

My Lords, I start by saying that I very much enjoyed the maiden speeches of my noble friend Lord Gascoigne and the right reverend Prelate the Bishop of Norwich. I am afraid that both of them have stepped out just in time for me to stand up and thank them. I know that they will make great contributions to this House given their respective experience.

In the gracious Speech, His Majesty stated how the Government’s focus

“is on increasing economic growth and safeguarding the health and security of the British people for generations to come”.

With this in mind, there are three global changes afoot that pose serious risks to an already stressed economy and, ultimately, to British life and wider society. With the confluence of these global factors comes the question of how well equipped government is to overcome them.

First is the energy transition. As a point of order, I direct Members to my interests as recorded in the register of interests. Ahead of the upcoming COP 28 meetings, it is worth remembering that, globally, we are consuming the equivalent of over 100 million barrels of oil every single day, with fossil fuels still representing roughly 80% of the energy supply stack. The International Energy Agency estimates that the energy transition could require $5 trillion of investment every year if we are to achieve net zero by 2050. This is nearly double the projected $2.8 trillion of investment in clean energy prescribed for this year. Together, these realities raise doubt about our ability to limit global warming by 1.5 or even 2 degrees in the nearing timeframe. More crucially, what appears to be an energy crisis only is also, at least, an economic and national security challenge.

The second global risk is artificial intelligence, including generative AI. AI is more than just a technology issue; it has far-reaching implications for the economy, with the prospect of productivity gains and boosting economic growth, although how and when this may occur exposes the economy to vulnerabilities. AI also has implications for business, with predictions of a declining labour force, albeit leading to lower operating costs and higher company profits. AI has implications for society, as economic gains could accrue largely to owners of capital rather than to providers of labour, thereby increasing the threat of greater inequality and social unrest.

Ultimately, AI could mean changes in the role and scope of government, as my noble friend Lord Bridges highlighted. At a minimum, facing a rising jobless underclass, the state will have to confront more assertively at least two big policy areas: taxation and welfare. Of course, Governments are alert to the changing calculus that AI brings to the actions and behaviours of rogue states.

Thirdly, there is the global risk of widening and worsening geopolitical fissures, as well as the reconstitution of the world map. Both of these complicate the energy transition and the impact of artificial intelligence. Noble Lords will not have failed to notice that BRICS nations, led by Brazil, Russia, India, China, and South Africa, are expanding to 11 emerging countries. From January 2024, the group will be home to over 40% of the world’s population and this will represent 36% of world GDP. This group will have the potential to open and alter the world’s trading corridors, supply chains and direction of investment. Meanwhile, the so-called swing states, including Turkey, Saudi Arabia and other Gulf Cooperation Council countries, are already altering the movement and pricing of key commodities such as foodstuffs and critical minerals upon which the energy transition relies.

The widening schism between developed and developing nations is frustrating the progress on the energy transition through COP negotiations. Furthermore, it is entrenching the technological splinternet that pits China and other state actors against the West in a race for technological superiority. It seems to me that we are presently underequipped to mitigate and address these multifaceted risks. Thus, we require a serious review of the way this Government, and this Chamber, confront Britain’s threats as they rapidly change militarily, technologically and economically. Of course, the 2021 government integrated review and this year’s integrated review refresh remind us of the benefits of an overarching cross-departmental approach within which to think about global threats.

However, we must be open to reassessing the vulnerabilities of the more siloed lead department model that governs our Civil Service and our own ability in this Chamber to gauge the intricate and emerging global threats. After all, if there is one key lesson from the 2020 pandemic, it is that there are always second-order effects that must be confronted by a more unified approach than that offered by the lead department model. To put it plainly, what was in the moment seen as just a health crisis has had tentacles spanning the economy, education and civic life in ways that we now know could inflict irreparable damage on future generations. In a similar vein, the threats targeting the UK today warrant a more comprehensive and coalesced analysis, assessment and response if we are to adequately avert them.

Budget Statement

Baroness Moyo Excerpts

Thursday 16th March 2023 Lords Chamber

[Baroness Moyo (Con) (Maiden Speech)]

My Lords, I am deeply privileged to speak for the first time in your Lordships’ House. It is an honour to take my place on these distinguished Benches. I thank everyone in this august House for the warm welcome that I have received from all sides. I thank the officers and staff I have met for their support on all matters great and small. This includes Black Rod and her staff, the Clerk of the Parliaments’ Office, doorkeepers, police officers and attendants in the Library and dining areas. I also sincerely thank my supporters, the noble Baroness, Lady Baroness Manningham-Buller, and my noble friend Lord Reay.

In preparing for this occasion, I visited the archives of Hansard and read the maiden speeches of several noble Lords past and present with whom I share an interest in the economy: former Chancellors of the Exchequer my noble friends Lord Clarke of Nottingham and Lord Lawson, and the noble Lord, Lord Darling; former Bank of England Governor the noble Lord, Lord King of Lothbury; business leaders and economists my noble friend Lady Lea and the noble Baroness, Lady Fairhead, and the noble Lords, Lord O’Neill and Lord Skidelsky. Their words on the centrality of economic growth underline how much of what I wish to say today has echoed in this Chamber through the decades. Yet the theme of economic growth and its impact on all our lives is as important today as at any other point in living memory—perhaps more so.

I have been fortunate in my career to have worked through the vagaries of the world economy, including the challenges of the global financial crisis, Brexit and navigating the Covid pandemic. The perspective that I bring to this House is born of both public and private sector experiences over the past 30 years: in public policy, at the World Bank and as a non-executive director in His Majesty’s Department for Business and Trade; in finance, in the City of London, having spent nearly a decade at Goldman Sachs; and in business, on the boards of many large, global and complex organisations, including Barclays Bank and the investment committee of the Oxford University endowment.

In my career as an economist, I have long believed that the ability to create and sustain economic growth is the defining challenge of our time. I do not mean growth for growth’s sake or merely for the sake of record-keeping—for example, an economy increasing growth from 3% to 5%—but rather because economic growth is a prerequisite for vital public goods such as the quality of education, reliable healthcare, a clean environment and dependable infrastructure. Economic growth is also a precursor for innovation, improving how we communicate, travel, produce food at scale and solve seemingly intractable challenges such as the energy transition. Importantly, growth is necessary to maintain a healthy democracy. It ensures a wider share of prosperity and supports a stable, plural society. Taken together, with economic growth, we are able to put a dent in poverty and sustain human progress. Without it, lives become smaller and society atrophies.

Such is the mandate of your Lordships’ House, we must and do scrutinise the legislation of the land. Beyond this, the ultimate measure of how well we do our duty rests on how well we incorporate long-term growth consequences into the judgments that we make in our work here. In particular, in debates such as today’s on the Government’s Spring Budget, we are minded to consider the costs and consequences of our decisions on society’s long-term growth trajectory.

According to the OBR, growth projections for the UK peak at 2.5% before falling back below 2% over the next five years. Yet theory tells us that an economy needs to grow by at least 3% per year in order to double per-capita incomes in a generation, which is about 25 years, and, in so doing, make meaningful progress in living standards. From my reading of the Budget, we can see the beginnings of a credible growth plan, although it seems concerning that corporation tax in 2023-24 has been reaffirmed to rise from 19% to 25%. Surely, there is more work to be done to unburden companies from excessive regulation—after all, there is no credible path to strong, sustainable economic growth if the economy is subjected to both high tax and high regulation.

This House has an important role in reinvigorating the British economy and, relatedly, Britain’s standing in the world. Jump starting economic growth must mean multi-decade commitments and investments today in key areas, such as technology, the environment and the energy transition. To accomplish this, we need both public and private investment. In this Spring Budget, I am encouraged to see government pledges to drive investment, including corporation tax relief worth £25 billion to businesses over the next three years and investment in technology R&D worth £1.8 billion. In energy, I am pleased to see a commitment of up to £20 billion in carbon capture projects. Notably, I share the belief that investment in nuclear energy must be part of a green taxonomy; it is crucial to Britain’s energy security.

If the United Kingdom is to remain competitive in the intensifying contest for global private investment, the Government must also continue to telegraph time-consistent policies. These policies reduce economic uncertainty and offer investors confidence that, when they invest in Britain, they can reasonably expect to generate returns above the cost of capital. Crucially, policy-framing must not merely be obsessed with risk mitigation and setting rules for what we cannot and must not do; it must also point towards innovation and investments that catalyse economic growth, as we have seen in this Budget.

The world’s population has now surpassed 8 billion people, with estimates that nearly 90% of the world’s population lives in the developing world. Having been born in Zambia and having spent my formative years in Africa, I am acutely aware of how the rapid shifts and trends emerging from these developing regions—demographics, resource scarcity and geopolitics—are shaping the prospects for growth in Britain and the global economy in its entirety. The fact that I stand here today is a testament that, here too in this Chamber, there is a recognition that the perspectives from these emerging regions must continue to be represented in the important work that we do.